Providence Firefighters Sue City

Providence firefighters are threatening to seek more than $500,000 in damages if the city continues to be late on its payments into the pension system.

The union, Local 799 of the International Association of Firefighters, says the delayed payments jeopardize the pensions of current retirees as well as members who have yet to retire. President Paul Doughty says the union will invoke a little-known section of state law that says they can sue for damages if the city does not change its practice.

The lawsuit is the latest fallout from Internal Auditor James Lombardi’s report, which warned the city’s cash reserves had dwindled from $36.6 million to $4.6 million over the past year. Lombardi also revealed that the city was late on $18 million out of $38 million in pension payments for the year. Karen Watts a spokesman for Mayor David Cicilline, told GoLocalProv that “in all likelihood” the pension payments will be completed by Dec. 31, 2010—halfway into the 2011 fiscal year.

Union imposes deadlines on city

That’s too late for Doughty. To him, the issue is clear-cut: if the city budgets for pensions payments in a certain year, then it should make these payments before the end of the fiscal year. “We think there’s a bright line on June 30 that all the contributions should be in,” Doughty told GoLocalProv.

The union filed a lawsuit on Oct. 26 asking Providence Superior Court to order the city to make its payments. The suit also seeks compensatory damages for any money union members lost in unearned interest because of the delayed deposits into the pension fund.

In addition to those two actions, the union now is preparing to invoke a state statute that allows employees to sue for damages if their employer takes money out of their paychecks and doesn’t use it for its intended purpose. Doughty filed a notice on Nov. 2 with the city demanding that it make the payments. If the city does not comply by Dec. 2, it faces a penalty of $50 per day per employee.

Union retains right to seek additional damages

Assuming the city sticks to its Dec. 31 deadline for making the payments, the penalty would be hefty: $580,000, based on a firefighter force of about 400 members, according to Doughty.

“I am not necessarily going to take these damages … I retain the right,” Doughty said.

Before exercising that right, he wants to see how the city responds to the lawsuit. Watts told GoLocalProv that the city has yet to formally respond to the suit. She declined to discuss any other aspects of the suit.

Doughty said the union still needs to get a handle on exactly how much of the $18 million in late pension payments is affecting the pensions of firefighters. He also wants the city to account for what happened to the money it deducted from the paychecks of firefighters. (Doughty said he will obtain the necessary documents during the discovery phase of the suit.)

If the firefighters end up going after - and getting - the $500,000-plus in damages, Doughty said they will use the money for "something constructive" like re-investing it in the pension system or funding an additional audit of city finances.

City delays in pension payments

According to Watts, it has been city practice to make pension payments in the next fiscal year. She said city has started to change that. “The City’s practice for the years prior to FY 2009 was to make the contributions to the pension fund at the end of the 2nd quarter of the following fiscal year,” Watts told GoLocalProv. “In FY 2009 and FY 2010 the City accelerated the payments and made a significant portion of the contribution in December of the fiscal year as opposed to October/December of the following fiscal year.”

Doughty views the $580,000 in damages as a last resort if the city shows no sign of changing its practice of delaying pension payments. “If that’s what we need to do to stop them from doing it, I would seek damages,” Doughty said.

The city deputy finance director, Lawrence Mancini, said it was premature to comment on what kind of an impact nearly $600,000 in damages might have on the state of the city’s finances because the lawsuit was still pending. Acting finance Richard Kerbel was unavailable for further comment.